Which Makes Better Financial Sense: Leasing or Buying a Car?
If you’re looking for a new car, you may have wondered whether you ought to lease or buy it. Both leasing and buying have their perks. The best option for you depends on your situation and needs.
To help you decide, we’ve laid out some of the top perks — and drawbacks — of leasing and buying.
Basics of Car Leasing & Buying
Buying a car is pretty straightforward. You pay for a car, either in full or by financing it. Once you’ve finished making payments, the car is yours to keep.
On the other hand, leasing a car is similar to renting an apartment. You don’t own the car but, rather, are paying to use it for a period of time. Usually, leases will last for a set time frame — for example, three or four years — at which point you either return the vehicle or, in some cases, buy out the lease.
Lease vs. Buy? Factors to Consider
Depending on what you want and need out of your car, there are some pros and cons of leasing vs. buying. Consider each of the following factors to help you decide what option might be best for you.
In general, the monthly payments for a lease are usually lower than those associated with financing a car. If you need to get behind the wheel but your monthly budget is tight, leasing may be a good option.
On the other hand, although monthly payments are typically higher for a car loan, they don’t last forever. Once you pay off your loan, you will not have a monthly payment until you need to purchase a new car.
Your required mileage
Mileage is an issue associated with leasing that can catch a lot of people off guard. Many leases will come with a stipulation regarding how much you can drive the car. These mileage limits may result in you having to pay overage charges if you exceed them.
If you have a short commute to work and live close to all the destinations you frequent, this is likely not a problem. However, if you are planning road trips or have a long commute, these limits may make leasing more expensive than you think.
The kind of car you want
Leasing a car can be a great way to get a brand-new ride every few years. Once the lease is up, you simply turn the car in and can immediately exchange it for a shiny new one. So, if you are someone who values the latest technology, you may want to consider leasing.
Buying a car means that it will be with you for the long haul — unless you choose to sell it and purchase a new one.In addition, since leasing often involves lower monthly payments, you may be able to afford a more expensive luxury vehicle.
One key benefit of leasing a car is that you don’t have to worry about maintenance. Most of the time, leases will include costs for repairs and a warranty for the majority of the lease period.
On the other hand, when you purchase a car, you are responsible for all associated maintenance.
Remember that when comparing the financial benefits of various purchases, you shouldn’t just consider the monthly payments but the costs over the long term as well. Unless you choose to buy out a lease, you will always have car payments. In addition, there are typically fees associated with initiating a lease which you’ll have to pay each time you start a new lease.
If you purchase a car, the upfront costs are higher, but you’ll eventually own the car and be free from monthly payments for a while.
Shopping to Compare Your Options
If you’re not quite sure which option is best for you, shopping for car loans to understand the difference in associated monthly costs can help you decide.
The best way to get a good deal on a car loan is to compare various lenders. You can start with OUCU, where we offer low rates, no application fees, and friendly service to help you each step of the way. Click below to get started.
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